China eases rules on foreign investment

PUBLISHED : Thursday, 22 November, 2012, 12:00am
UPDATED : Thursday, 22 November, 2012, 3:39am

The mainland has eased rules to facilitate foreign direct investment in an effort to boost the ebbing capital inflow.

Investment coming into the country has fallen in nine of the 10 months this year, official data showed this week, while outward investment continues to surge.

The State Administration of Foreign Exchange yesterday said that from December 17, it would cancel the complex review procedures related to capital flows and currency exchange quotas of foreign enterprises.

These companies will now only need to register their information with relevant departments, according to a statement posted on the regulator's website.

"The simplified rules will encourage more foreign direct investment," said Standard Chartered Bank economist Li Wei. "However, it's yet to be seen whether the weakening FDI trend will reverse in the short term because it hinges more on the domestic and overseas economic situation."

Limitations on the use of foreign exchange funds would be eased too, the SAFE said, including allowing foreign-invested enterprises to extend loans to their overseas parents.

The regulator has also cut some technical procedures necessary for foreign investors in buying stakes in mainland firms.

The current regulations have been in place since 1994, when Beijing unified a dual exchange rate system and replaced it with a "managed float".

Separately, the SAFE issued another statement yesterday, pledging to "closely monitor" the impact of changed market sentiment on the supply and demand of foreign exchange.

It noted that capital market sentiment had "turned to optimism from excessive pessimism" towards the nation's economic and currency prospect, leading to "a bit stronger yuan exchange rate pattern".